Subprime mortgage lender New Century Financial Corp. filed for bankruptcy Monday morning, seeking Chapter 11 protection while firing 3,200 employees, or roughly 54% of its work force.
New Century also agreed to sell its loan servicing unit to Carrington Capital Management LLC for around $139 million and a handful of loans and residual interest in some trusts to Greenwich Capital for $50 million, pending bankruptcy approval.
CIT Group and Greenwich Capital Financial Products Inc. will provide up to $150 million in working capital to help restructure New Century, a means to keep the mortgage lender operational.
President and chief executive Brad A. Morrice said a Chapter 11 bankruptcy filing would provide the best opportunity for the company to sell its servicing portfolio and and loan origination operations.
The move came after weeks of exploration to find a suitable option to keep the company operational, although New Century is barred from accepting new mortgage applications on grounds that it has violated state laws.
New Century filed for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware, and still face federal investigations from the SEC and the U.S. Justice Department, along with civil lawsuits from upset shareholders.
See the list of closures, mergers, and mortgage layoffs by lender.